China cracks with liquidity concerns, more data tonight
|EU mid-market update: China cracks with liquidity concerns, more data tonight; Apple supplier Foxconn cut revenue outlook.
Notes/Observations
- Concerns over stress in China's property sector and its potential debt defaults initially weighed upon risk sentiment. China reportedly set up a taskforce for its largest asset fund manager, Zhongzhi Enterprise Group (ZEG) following missed trust payments.
- More speculation that China PBOC would likely cut the RRR by 25bps and the policy interest rate by 10bps in the coming weeks.
- More key Chinese data expected during Tuesday’s Asian session
- Quiet EU session ahead of Tuesday’s region observed Asension Day holiday.
- Foxconn Q2 results beat on bottom line but missed on top line; Noted AI server demand continues to strongly increase, that a PC industry slump will continue into H2 and is cooperating with Nvidia, Sharp and Microsoft, aswell as plans for plant expansions in India.
- Asia closed lower with Hang Seng underperforming at -1.4%. EU indices are mixed -0.2% to +0.6%. US futures are +0.1-0.4%. Gold 0.0%, DXY 0.0%; Commodity: Brent -0.4%, WTI -0.3%, TTF +2.5%; Crypto: BTC +0.1%, ETH -0.1%.
Asia
- China Country Garden property developer suspended trading of its 11 onshore bonds from Monday, Aug 14th.
- Rumors circulated that large private equity and trust groups in China facing huge liquidity crises. Various companies Everbright Trust, Minmetals Trust, and AVIC Trust issued urgent statements to refute the claim.
- China PBOC set Yuan reference rate: 7.1686 v 7.1587 prior (**Note: market consensus mid-point at 7.2461).
- New Zealand NZIER Shadow Board recommended RBNZ keep the OCR on hold at 5.50% this week (**Note: would be the 2nd straight pause in the current tightening cycle.
Taiwan
- Taiwan Vice-President William Lai landed in NY; Visit is condemned by China.
Energy
- Iran Plan and Budget Organization (PBO) official: Daily exports above 1.4M bpd.
Speakers/fixed income/FX/commodities/erratum
Equities
Indices [Stoxx600 -0.03% at 459.02, FTSE -0.13% at 15,904.65, DAX +0.46% at 15,904.65, CAC-40 +0.17% at 7,352.81, IBEX-35 +0.25% at 9,457.58, FTSE MIB +0.57% at 28,435.00, SMI +0.08% at 11,090.20, S&P 500 Futures +0.28%].
Market focal points/Key themes: European indices open generally lower turned to trading mixed in the early hours of trading; better performing sectors include health care and telecom; sectors trending lower include energy and industrials; oil & gas subsector under pressure after three consecutive days of Brent falling; GAM suspends EGM over shareholder opposition to Liontrust merger; Exort takes stake in Philips; no major earnings expected in the upcoming US session.
Equities
- Consumer discretionary: Bechtle [BC8.DE] +2.5% (analyst action - raised to Buy at Hauck & Aufhauser). Watches of Switzerland [WOSG.UK] +3.5% (analyst action).
- Financials: Plus500 [PLUS.UK] +5.0% (H1 results, $60M share buyback), Hypoport [HYQ.DE] -3.5% (H1 results).
- Healthcare: Koninklijke Philips [PHIA.NL] +5.0% (Exor acquires 15% stake in Philips), Valneva [VLA.FR] -11.5% (PDUFA date delay).
- Industrials: Volkswagen [VOW3.DE] -0.5% (Tesla again cuts some China prices), Bilfinger [GBF.DE] +5.5% (Q2 results).
Speakers
- Germany Econ Min Habeck noted that current early indicators did not yet point to sustainable economic recovery in the coming months.
- Russia said to have halted purchases of foreign currencies Aug 10th as it launched the digital version of its ruble currency.
- China Commerce Ministry ((MOFCOM) official noted that the govt to push for a narrowing of the negative list for foreign companies.
- China said to have set up taskforce for its largest asset fund manager, Zhongzhi Enterprise Group (ZEG) following missed trust.
- India Trade Sec noted that was expecting to close pending UK FTA issues later this month (Aug).
- US-Japan agreement to develop hypersonic missile interceptor expected to be signed at Biden-Kishida meeting on Fri, Aug 18th.
- US Treasury Sec Yellen noted that govt was working to build resilient, diversified clean energy supply chains to protect its economic security.
Currencies/fixed income
- USD initially benefited from safe-haven flows as concerns over stress in China's property sector and its potential debt defaults. Dealers noted that China’s Country Garden Holdings Co situation put the focus back on the front burner. Dealers focused on the rash of upcoming data from China on the overall health of its fragile recovery.
- EUR/USD trading at 1.0950 as markets debate the underlying trend of the European growth situation. A plethora of EU GDP data to be released this with and concerns that it remains weak and the recession could come back to haunt the region.
- USD/JPY continued to test the 145 level during Asia. Dealers noted that any break above the level could prompt more verbal intervention from Japanese officials to complement the Sept FX intervention to curb Yen weakness.
Economic data
- (SE) Sweden Aug SEB Swedish Housing-Price Indicator: 15 v 14 prior.
- (FI) Finland July CPI M/M: 0.5% v 0.2% prior; Y/Y: 6.5% v 6.3% prior.
- (FI) Finland Jun Final Retail Sales Volume Y/Y: -3.5% v -3.3% prelim.
- (DE) Germany July Wholesale Price Index M/M: -0.2% v -0.2% prior; Y/Y: -2.8% v -2.9% prior.
- (IN) India July Wholesale Prices (WPI) Y/Y: -1.4% v -2.5%e.
- (CH) Swiss weekly Total Sight Deposits (CHF): 484.8B v 493.0B prior; Domestic Sight Deposits: 474.7B v 477.4B prior.
- (PL) Poland July Final CPI M/M: -0.2% v -0.2% prelim; Y/Y: 10.8% v 10.8% prelim.
- (IN) India July Trade Balance: -$20.7B v -$21.0Be.
Fixed income issuance
- None seen.
Looking ahead
- 05:25 (EU) Daily ECB Liquidity Stats.
- 05:30 ((DE) Germany to sell €4.0B in 6-month Bubills.
- 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays).
- 06:00 (IL) Israel to sell combined ILS1.6B in 2026. 2028, 2029, 2031, 2032 and 2052 bonds.
- 07:25 (BR) Brazil Central Bank Weekly Economists Survey.
- 07:30 (IN) India July Trade Balance: No est v -$20.1B prior; Exports Y/Y: No est v -22.0% prior; Imports Y/Y: No est v -17.5% prior.
- 08:00 (PL) Poland Jun Current Account Balance: €1.8Be v €1.4B prior; Trade Balance: €0.9Be v €1.1B prior; Exports: €28.7Be v €28.2B prior; Imports: €27.7Be v €27.1B prior.
- 08:00 (IS) Iceland July Unemployment Rate: No est v 2.9% prior.
- 08:00 (BR) Brazil Jun Economic Activity Index (Monthly GDP) M/M: +0.5%e v -2.0% prior; Y/Y: 1.7%e v 2.2% prior.
- 08:00 (IN) India July CPI Y/Y: 6.4%e v 4.8% prior.
- 08:00 (UK) Daily Baltic Dry Bulk Index.
- 08:00 (IN) India announces details of upcoming bond sale (held on Fridays).
- 08:00 (ES Spain Debt Agency size announcement for upcoming bill auction (**Note: scheduled for Tuesday).
- 08:30 (CL) Chile Central Bank Meeting Minutes.
- 09:00 (FR) France Debt Agency (AFT) to sell 6.2€B in 3-month, 6-month and 12-month bills.
- 09:45 (UK) BOE Gilt sale operation.
- 11:00 (CO) Colombia Jun Manufacturing Production Y/Y: -3.0%e v -3.4% prior; Industrial Production Y/Y: No est v -1.0% prior.
- 11:00 (CO) Colombia Jun Retail Sales Y/Y: -7.0%e v -5.1% prior.
- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.
- 16:00 (US) Weekly Crop Progress Report.
- 19:30 (AU) Australia ANZ/Roy Morgan Weekly Consumer Confidence: No est v 75.0 prior.
- 19:50 (JP) Japan Q2 Preliminary GDP Q/Q: 0.7%e v 0.7% prior; GDP Annualized Q/Q: 2.9%e v 2.7% prior; GDP Nominal Q/Q: 2.6%e v 2.0% prior.
- 21:20 (CN) China 1-Year Medium Term Lending Facility (MLF) Monthly Setting.
- 21:30 (AU) Reserve Bank of Australia (RBA) Aug Minutes.
- 21:30 (AU) Australia Q2 Wage Price Index Q/Q: 0.9%e v 0.8% prior; Y/Y: 3.7%e v 3.7% prior.
- 22:00 (CN) China July Industrial Production Y/Y: 4.3%e v 4.4% prior; Industrial Production YTD Y/Y: 3.9%e v 3.8% prior.
- 22:00 (CN) China July Retail Sales Y/Y: 4.2%e v 3.1% prior; Retail Sales YTD Y/Y: 7.6%e v 8.2% prior.
- 22:00 (CN) China July YTD ixed Urban Assets Y/Y: 3.8%e v 3.8% prior.
- 22:00 (CN) China July YTD Property Investment Y/Y: -8.0%e v -7.9% prior; Residential Property Sales YTD Y/Y: No est v 3.7% prior.
- 22:00 (CN) China July Surveyed Jobless Rate: 5.2%e v 5.2% prior.
- 23:00 (TH) Thailand Central Bank to sell THB65B in 3-month bills.
- 23:35 (JP) Japan to sell 5-Year JGB Bonds.
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